San Jose Sharks: On Thick Ice

By Larry Barrett  |  Posted 2004-05-14

San Jose Sharks: On Thick Ice

Joe Will and other San Jose Sharks executives finally have something to smile about this spring. Their National Hockey League team is back in the playoffs—and with a lighter payroll.That means Will is probably doing something right. He is the Sharks technology guru and has been collecting data about the performance of pro players, sticking it into a databank and allowing general manager Doug Wilson and the teams coaches to manage the turnaround of the Sharks by more than just gut instinct.

Wills system combines player statistics such as goals scored and assists; scouting reports on intangible assets such as leadership skills; historical data on a players age, years in the league and other wear and tear; and salaries paid for players results.

The system doesnt tell the coaches or GM what to do. But it lets them poke and prod to get the most goals for their bucks.

"We collect all this data from sources around the world and then try to organize it in a way that gives our coaches and staff a starting point for their analysis," Will says. "It gives us the luxury of time to do subjective analysis."

This holistic view gave the Sharks the ability to put together a team that might not have a lot of marquee stars—or their high salaries—but is extremely effective. This years team, which had a payroll $14 million below the $48.5 million spent in 2002-2003, racked up a club record 104 points in a season of 82 games. Teams earn two points for each victory, one for a tie and one for a loss in overtime.

The Sharks boosted their point total by 31 over last year. Where they paid, in effect, $657,500 in payroll for each point a year ago, they paid $331,300—a shade more than half as much—this year. Which means fans sitting in the Sharks corporate boxes probably could learn a lesson or two on how to manage the "human assets" in their own companies from the results theyre seeing on the ice below.

Finding workers who have a wider set of skills rather than ponying up top dollar to star employees with very narrow specialties can create more successful organizations, as the Sharks recent experience shows. A law firm, for instance, might find that an attorney with a few years of experience in both commercial real estate and maritime disputes is more valuable in the long run than a seasoned real estate litigator. A controller who has spent four years cutting his or her teeth within the company might be just as skilled and less expensive to hire than a big-name chief financial officer from outside the industry.

"Most organizations have moved to a market value-based salary structure" that allows companies to compare and adjust their salaries for certain positions against regional or national averages, says Chris Fusco, a senior compensation analyst for Cambridge, Mass.-based, which collects salary information each quarter from thousands of companies throughout the U.S.

The Sharks team in 2002-2003 was a disappointment. Picked by many pre-season pundits to mount a serious run at hockeys big prize, the Stanley Cup, the team didnt even make the playoffs, even though its payroll ranked eighth among 30 teams in the league.

After closing the 2001-02 season with 99 points and a divisional crown, the 2002-2003 Sharks only earned a paltry 73 points. That left the team in last place in the Pacific Division. At many games up to 3,000 seats, or 17% of arena capacity, were empty. And the team missed the bonus revenue of playoff games, extra dollars that can mean the difference between profit and loss.

"It was a really depressing time for everyone around here," Will says. "And it cost some very good people their jobs."

The Sharks fired their head coach and general manager. The team also traded away several high-priced veterans, including all-star forward Owen Nolan, the team captain, and decided not to re-sign others. The decisions were based largely on what Wills system told Sharks executives.

"We sat down in the off-season and looked at some of the teams that were having success with much lower payrolls and knew we had to do the same," Will says.

The Ottawa Senators, with a payroll of $34.3 million, and the Minnesota Wild, with a payroll of $20.7 million, had made deep runs into the Stanley Cup playoffs. Those teams were using databases containing stats put together by the NHL that are available to all teams. While technology alone wasnt responsible for these teams performance-to-salary ratio, it did help the Senators and the Wild efficiently slot players based on roles and salaries.

The first step in putting the teeth back in the Sharks came when Wilson, the new general manager, along with new head coach Ron Wilson (no relation) and their assistants, got together to create what Will calls "the ideal team."

The goal was to define, using trackable statistics, the right types of players to put on the team, such as "a checking-line forward who is between 24 and 28 years of age and averages 30 points a season" or a "veteran defenseman who can move the puck."

Using a database that Will had created originally to track the progress of prospects, the Sharks built a virtual team— based on performance and age—comprised of players already on their roster or on their minor league teams, as well as players on other NHL rosters.

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The database included hundreds of Sharks prospects playing in leagues throughout Canada, the U.S. and Europe; the 700-plus players on the other 29 NHL team rosters; and several thousand minor league players. Each players statistics—goals, assists, time on ice, goals-against average, etc.— were compiled, as well as age, height, weight, salary and eligibility status.

These individual statistics and salaries were pulled into the Sharks database from two sources: a database of game statistics from RinkNet Marketing Inc. in Guelph, Ontario, and a salary database, called the Local Arbitration Solution system, maintained by the NHL in New York.

The RinkNet database collects team and individual player statistics every day from more than two dozen leagues around the world. For $12,000 a year, an NHL team can find out exactly how much time on ice a forward playing in the German Elite League logged the previous night.

Next Page: Beyond the numbers.

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Beyond the Numbers

Beyond the Numbers

While the RinkNet system might tell a team that a player logged 15 minutes of ice time and didnt score any goals or log any assists, it doesnt tell a team if a player created scoring opportunities with his physical play or if hes an exceptionally fast skater. For that information, the Sharks send out scouts armed with their choice of handheld computer, such as a Palm digital assistant. They can upload commentary and analysis in straight text, which is then added to the existing statistical and contract information residing on the Sharks player database. Combining this data with the RinkNet statistics gives the decision-makers in the Sharks organization a complete view of every players performance that day as well as a chronological history of their careers.

The Sharks then turn to the NHLs Local Arbitration Solution system to help them plot their fiscal course. The systems database contains the salary, age and contract information for every player in the NHL. It also holds historical information for every player, meaning that a general manager can see not only a players performance over the years but how much he was paid for each season and how that compares to the performance of other players with similar salaries or statistics.

"We can go into the system and make a query for all players who scored 20 goals [a season], give or take 5%, in the last four years and what their average salary is," Will says. "Then we can take a look at our roster and determine whether or not, again statistically, it makes sense to sign a free agent who can give us X goals or X points for X dollars over X number of years."

Using current salaries and statistics, as well as historical information on players performances at different stages of their careers, the Sharks took some calculated risks. They gambled—but with statistical support—that certain younger players could perform as well in the coming year as veterans had in the past.

The team traded captain Nolan, 32, and his $6.5 million-a-year contract, to the Toronto Maple Leafs for Alyn McCauley, 27—a forward with half the NHL experience as Nolan. They also picked up 22-year-old center Brad Boyes and a first-round draft pick that they coupled with another draft pick to select 19-year-old forward Steve Bernier.

The Sharks traded to Toronto 16-year veteran defenseman Bryan Marchment, 34, and his $2 million-a-year contract, for a pair of draft picks, and opted not to re-sign all-star forward Teemu Selanne, 33, with his $5.8 million-a-year contract.

With McCauley on board at $1.2 million, the Sharks traded a minor-league prospect to the New York Rangers for forward Nils Ekman, 28, at $575,000 a year, and brought up minor-league defenseman Tom Preissing, 27, at $800,000 a year.

The new Sharks—McCauley, Ekman and Preissing— tallied 44 goals and 77 assists in 2003-2004 for a total salary of $2.575 million, or $21,281 per point. The former Sharks— Nolan, Selanne and Marchment—combined to score 36 goals and 48 assists for a total salary of $14.3 million, or $170,238 per point.

After finishing last in the five-team Pacific Division in 2002-03, the Sharks rallied to win the division and secured home-ice advantage for at least the first two rounds of the playoffs. The 31-point gain was the largest improvement of any NHL team this season. The payroll? $34.5 million, down 29% from $48.5 million in 2002-03.

The Detroit Red Wings, perennial Stanley Cup contenders, had the leagues highest payroll at $77.9 million and finished atop the NHL with 109 points. But big salaries dont always translate into big success. The perpetually underachieving New York Rangers finished with 69 points despite having the leagues second-highest payroll at $76.5 million.

"Theres no question that weve been lucky this year in some respects," Will says. "But we put ourselves in the position to be lucky based on sound decisions made using this data."

Corporations reeling in the wake of a disappointing year or mired in a painful reorganization might not see the immediate improvement that the Sharks enjoyed. But committing your organization to reevaluating the way payroll and individual responsibilities are managed can be the first step toward regaining credibility and profitability.

"Obviously a lot of other factors go into winning and losing hockey games," Will says, "but getting the most value out of the players you draft and sign makes all the difference."

Next Page: San Jose Sharks Base Case.

San Jose Sharks Base

San Jose Sharks Base Case

Headquarters: 525 W. Santa Clara St., San Jose, CA 95113
Phone: (408) 287-7070
Business: Professional hockey team; member, National Hockey League.
General Manager: Doug Wilson
Payroll: $34.46 million for 2003-2004 season, down 29% from previous year.
Challenges: Use proprietary and league databases to create an ideal roster within a certain salary range. Integrate scouting reports and statistics from personnel department with these databases to create player profiles.

Baseline Goals:

  • Earn 90 points from victories, ties and overtime losses during regular season.
  • Qualify for league playoffs at end of season.
  • Score at least 25 more goals than opponents in a season.
  • Reduce payroll from $48.5 million in 2002-2003, to below $34 million.

  • Rocket Fuel